Why Barclays PLC’s Exciting Investment Plans Should Thrust Earnings Skywards

Royston Wild evaluates what Barclays PLC’s (LON: BARC) drive towards automation is likely to mean for future earnings.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I am looking at why I believe Barclays’ (LSE: BARC) (NYSE: BCS.US) heavy investment in technology should underpin spectacular long-term growth.

Rise of the machines

Still haunted by the consequences of the 2008/2009 banking crisis, Barclays is embarking on a massive cost-cutting initiative to bolster its capital base and create a more streamlined operation. Entitled Transform, the scheme is designed to slash operating expenses to £16.8bn by 2015 by culling thousands of jobs across the business and initiating a host of branch closures.

Barclays is instead focusing on automation to drive growth, and has said that “adopting innovative technology and automated processing” is barclayskey to boosting its profile on the UK high street. And the bank is investing heavily to adapt to changing consumer habits and the explosion in online activity.

The company recently launched its PingIt service — which allows mobile payments to be sent or received using just a phone number — while other measures across the business include expanding the product range and flexibility of its BARX electronic trading platform. And the bank has plenty of other initiatives under its sleeve set for launch across the business.

As well, Barclays has targeted the emerging markets of Africa as a major driver of earnings expansion. Most notably the firm announced plans in late 2012 to merge its operations on the continent with top South African bank Absa, for £1.3bn. The move saw the UK-listed firm raise its stake in the firm to 62.3% from 55.5%, giving Barclays access to more than 14m customers across 10 countries under the newly-branded Barclays Africa Group.

Barclays has been less busy on the M&A front over the past year, but the company has not been shy in flashing the cash to latch onto major growth areas on the continent. Indeed, the company rolled out its Absa Pebble technology which allows point-of-sale payments to be taken by mobile phone. Millions of African customers still do not own bank accounts, so this technology — which Barclays plans to roll out across other markets — could represent a massive game changer.

Earnings explosion on the cards

City analysts expect Barclays’ restructuring plan to thrust earnings higher from this year onwards, with growth to the tune of 67% for 2014 expected to be followed with a further 22% advance next year.

Such projections leave the bank dealing on P/E multiples of 8.3 and 6.8 for 2014 and 2015 respectively, obliterating a forward average of 15.9 for complete banking sector. On top of this, price to earnings to growth (PEG) readouts of 0.1 and 0.3 for these years — well below the bargain benchmark of 1 — illustrates Barclays’ terrific growth prospects relative to current prices.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston does not own shares in Barclays.

More on Investing Articles

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Growth Shares

I bought 319 Scottish Mortgage shares for my SIPP in January. Here’s how they’ve done

Scottish Mortgage shares were out of favour in January so Edward Sheldon bought more of them for his pension. Was…

Read more »

Investing Articles

Is Tesco’s share price still a bargain after rising 26% over a year?

Recent results show Tesco is still growing its leading market share, and despite its share price gains this year, it…

Read more »

Investing Articles

Is this FTSE 250 gem the next big thing in defence sector shares?

This FTSE 250 defence firm was founded by the MoD, has seen its order book and profits swell, and is…

Read more »

Investing Articles

Here’s what the National Grid share price fall could mean for passive income investors

It's long been seen as one of the FTSE 100's best stocks for durable dividends. What does the recent National…

Read more »

Female florist with Down's syndrome working in small business
Investing Articles

£6,000 in savings? Here’s how I’d try to turn that into a £500 monthly passive income

With careful planning and patience, it’s not hard to earn a passive income with UK shares. Here’s one way to…

Read more »

Investing Articles

Here’s how I’d aim for a second income of £1,000 a month, with just £10 a day

How much do we need to build a decent second income? With enough time, we could do it with a…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Down 12% in a month, is this the FTSE 250’s most overlooked gem?

Our author thinks Kainos is one of the most overlooked FTSE 250 gems. Here's why he thinks the future could…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

Just released: our 3 best dividend-focused stocks to consider buying before July [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »